- Dovish RBA minutes add weakness to the AUD/USD pair.
- Risk-off, NY Empire State Manufacturing gauge keeps USD strong.
- China inflation data, trade headlines will be followed for fresh impulse.
With the RBA minutes showing board’s readiness for further rate cuts, AUD/USD declines to intra-day low of 0.6765 during the Asian session on Tuesday.
In its minute statement for October month monetary policy meeting, the Reserve Bank of Australia (RBA) conveyed board members’ readiness to ease policy further to support growth and jobs. The statement also highlighted downside risk emanating from leading indicators and US-China trade/tech dispute.
Read More: The RBA minutes: Board prepared to ease policy further if needed to support growth, jobs
Risk tone turns heavy after markets doubt any breakthrough from the US-China’s latest deal as the dragon nation looks for further talks before finalizing any agreement. Also, the measures suggested in the “Phase One” deal seem not too promising to suggest an end of trade war between the world’s two largest economies. With this, the US 10-year Treasury yields decline to 1.70% by the press time.
While the risk-off mood has been favoring the US Dollar (USD) an upbeat print of the New York (NY) Empire State Manufacturing Index can also be considered as an additional reason for the greenback’s strength.
Investors will now look for China’s Inflation statistics for immediate direction while trade headlines can keep entertaining investors ahead of this week’s Aussie jobs report and Chinese Gross Domestic Product (GDP) data.
TD Securities anticipates upbeat inflation data from China while saying, “We expect a 3.0% y/y outcome for China’s CPI in September. Inflation has risen over past months due largely to higher food inflation, in particular pork prices, which were up 23.1% m/m, 47% y/y in August in the wake of the spread of African Swine Disease. This has also helped to push other meat prices higher. However, other CPI components remain soft, resulting in ex-food CPI matching its lowest reading since May 16. We expect a similar picture in September, with little sign of any let up in the rise in pork prices.”
Technical Analysis
Prices keep lagging behind a three-month-old falling trend-line, at 0.6790 now, which in turn increases the odds for the pair’s further weakness to 0.6740 and 0.6700 rest-points. However, an upside clearance of 0.6790 can trigger pair’s rise towards 0.6850 and 100-day Simple Moving Average (SMA) near 0.6865.
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